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Top Managers Get 51% of Fidelity Shares

August 17, 1995|From Reuters

BOSTON — Mutual fund giant Fidelity Investments said Wednesday that its parent, privately held FMR Corp., has given a 51% voting stake to 50 top executives and fund managers in what is believed to be the biggest ever transfer of voting control of a company to its employees.

Analysts said the move will help ensure the loyalty of Fidelity's high-flying portfolio managers and pave the way for an eventual successor to Chairman Edward Johnson, whose father founded Fidelity, the world's biggest mutual fund company.

"One can assume that this is part of a golden-handcuffs deal for some of Fidelity's best fund managers. It also sends an important message to the top people there that Fidelity wants to hold on to them," said John Bonnanzio, editor of Fidelity Insight, a publication that tracks the group, which has more than 9 million customers and nearly $500 billion in assets under management.

The share distribution, which first came to light in regulatory filings and was confirmed Wednesday by Fidelity, reduces the Johnson family's voting shares to 49%.

Analysts noted that the deal leaves Johnson, the 65-year-old Fidelity chairman widely known as Ned, a personal stake of 12%, down from almost 25%.

His daughter Abigail, 33, a Fidelity portfolio manager who is the only one of the Johnson children active in the firm, retains a 24.5% stake, making her the group's largest single shareholder.

Analysts and industry sources said one of the main motivations of the stock distribution may have been to lay the groundwork for Abigail, whose grandfather founded the company in 1947, to eventually succeed her father, though he is not expected to hand over the reins any time soon.

"He [Johnson] has got to be looking out for family interests. One of the main objectives in positioning Abigail as the largest shareholder may be to give her a run at the chairmanship without forcing her into the driver's seat now," a source close to the company said.

"In addition to helping Abigail, it helps Fidelity to keep its star performers. Everybody knows Fidelity has a lot of money under management, but he [Johnson] recognizes that his real asset is his people," the source said. "One of the things that made Ned Johnson successful was riding the wave of Peter Lynch. He marketed that to the hilt."

Lynch, now a Fidelity vice chairman, once managed its flagship Magellan Fund, which at $50 billion is the largest mutual fund in the country.

Fidelity would not disclose the names of the top 50 portfolio managers and executives who will receive the shares.

However, company sources said they almost certainly include Lynch; Jeffrey Vinik, his successor at Magellan, and top executives such as Gary Burkhead and others on the seven-person committee that runs the group.

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